PARTE:

CHAPTER FINANCIAL 3. MANAGFMFFT

3.1. AEEOUNTING $.4EASURFMENTS Accounting the scorecard buslness. economlc is of Any enterpi.lse neerJs transiate ts the diverseactivities a company of into a, set of objective nunnbers provide that informaticn abouttheirperformance, pr.oblems itssuccess. and The financiai health a company its finariciai cf is staternents consisting a balance of sheet, income an statement a cashfiowstatemeni. anci Balance Sheetis a financial snapshot takenai a pointin time,of all ihe assets owned the company all the by and clairns against thoseasseis. = Assets Liabilities Shareholders, + equity. INCOME STATEMENT An inconre statement records flowof resources the ovei-time, = Earnings Net Sales -- Ccst of Sa.les Cperating Expenses Nonoperating + Expense Ta.xes. Earnings referred profits income NetSales knorryn are as or and are as revenues. CASI-I FLOWSTATEMENT Thestatement changes financlal of in position. CASHFLOW Cashflowis the after-tax money available a company pay off debtsand invest to to in new projects. Afterthe initiation an oil field project of both cash cutflows and inflows should result. Cash Inflovvs Gross revenue fromthe saieoi oil,gas,rratural liquids sulur.gas or Taxcredits resulting fromexpensed items, depletion depreciation. or Borrowed capital. Occasionally investment oneplantreduces expenses a related an in the of facility. Netsalvage value. CZshOutftouts The royalty.

rrocuciirJi

ef :u au vaalu!tt:ll r4^t=>.

paystson bcrrowed capital' Interest principie and costs. operating and Direct inoirect tax. lncome

Qeieutations costby lessee. as Cost Expioration -. treated a capital Benusor LeaseRentalcost - treatedas a capitaicost b)t iesseeand as advance (subject depietion) lessor. by payment to royalt'y Cost Drilling somepartsof wellhead, value(casing, tlrat Tangible all equipment has a salvage investment. as leasesite)mustbe treated a capital value(!abor, mud,non-recotrerable lntangibie all itemsthatdo not havea salvage duringyear expense as or etc.)may be capitalized deducted an operating casing, eircurbered. by may be treatedas mineralincomesubjectto depletion the Payments Floyalty of beforecalculation gross royaityo\ffner- treatedas an expense(or subtracted income) the operator. by cost cost, intangible-drilling when no Capitalsubjectto depletion exploration cost. development intangible expensed, producing equipmeni cost,physical drilling to subject depreciationtangible Capitai pipe in gathering lines, equipment, tanksseparation value(pumps, with a salvage etc). in recovered to recovered the leasearesubject depletion gasliquids on Gasliquids by covered depletion. gas only a central plantaregenerally partially of: must calculations be madeon the basis All depletion costdepletion amount. percent depletion takethe larger CashFlow Diaaram paidcosts- depreciation interest Taxablelncome- grossincome- operating depletion interest + earned.

49

paid + interest cosis - interest earned Cash Flow= grossincome- operating * * of capitalinvestment reduction principal incometa.x,as ca.nbe seen in the diagram foliowing

V1

Stockholders Borroved Capitai

lrcone t!:om Patents, E ngi neeri ng, F.& D , etc. R&D r Oucsi de i nvestfi enl s

nguity Capi ta 1
CORPOP.ATIC}J CAgH

Cash Flow

WORKTNG CAPITAL

nT pF ar m

INVESTMENTS

DEPRECiATION

Taxable

Income

INCO4E TAX
NET PROFIT

Cas h

Flow

Dia g r a m

(A fter

S termol e)

:i
..1

peiJormance financial amongiirvestci's FiCEReturncn equityis the mostpopular because is a nreasure ihe efficiency whictithe firmemploys it of wiih and rnanagers Margin Asset turnover Financial Leverage capiiai.ROE= Profit x r owner's
for Earningavaiiab!e shai'eholders Earnings

1 ;

Sales Asseis

Asset Sharehclder Equity

RC E= Shareiiolciers' uitir eq

Sales

for values investors lookfor ROEtargetof 20 %; standard vuiil speaking, Generally o/o. go industry from 13-17 the hydrocarbon on RCA Return assets = = turnover Earning x Sales margin Asset x FIOA Profii
Sa!es

.Assets

It differsfrom FiOEin that ROA measureprofit as a percentof total assetsas equity only. to as of opposed profit a percent shareholder's ROIC considerable A highprofitmargin and a highassetturn are idealbut attract RONA. return netassets on Capital competition or Return lnvested on EBIT( 1-Tax rate) = ROIC Debt* Equity interest taxes and EBIT earning before maybe as follows: for Highlights a company An example Financial of
Millionsof dollars,exceptpei sharedata and noted

Totalrevenues Netincome per Netincome share(basic) paid Cashdividends paid Cashdividends pershare
51

and Capitai exploration expenditures Totalassets

3,943
32.489-

4,621 32,i 00

per Shareholders' equity share year-end 33.7-9 at Return average on shareholders' equity 1,6.6% Return avei'age on capita! employed 13.zo/L

33.00
18.1% 13.8%

Highlights Operating per Barrels day,except noted as Crude andnatural oil 'Gasliquids production ilaturalgas prociuction (thousand cubicfeetperday) products U.S.refined sold input crude U.S= to units product Chemicai revenues (millions dollars) of
!

637,
!:l-:::!-

662,000

4,f,42;0oo 4,382,000 5J

i'

1,213,000 , 2 1 2 , 0 0 0 1 938,000 954,000 5;953: $ :,,:1 $ 5,55717

3.3.RESERVOIR M.ANAGEMENT PHILOSOPHY A profound knowleclge the reservoir - andfluids the aquifer essential of rock and is to optimize hydrocarbons recovery and maximize economic, orderto produce in an profit economic operation evenwiththe lowest envisioned pricescenario. oil During fieldor reservoir exploitation are keyquestions be answered: there to o Reservoir geornetry continuity. anei c Water drivepresence strength. and c Locations wellsandplatforms. of n Completions perforation wells. and of . . (need fluici Recovery systems of injection). Howmuchoi!andgasmustbe available-

faciiities.

;** -'tn"'*,"; "*.i;;; ;;' ;';#--ri; ffi; -J,ffi;'

x NPV= qo_][] Price(t)- Capex(t)- Opex{t)- Taxes(tL Misc(t) ('t + discount raie)t dt

The illPV net presentvalueof a projectis givenby an integral cver tirrrelt):

The maintasksare: Opti ize dereloprnent production n: anei sii'ategy"

. I F+":+Jil;i -frcnnex:{ ' lll fll i-F-i

' o cg ssr * o! w el s, ooo, CaFac!tes

*l! I # ' .S- ili\ ^o r ll

r+t & // -.'t -.i

i\
'/l rt

i [,

,[i/

I in\ ,.---.- co cost /'

-+__-Inv.

L-y'
-"t

/ // tt

/'

/l

,o& n / cosr

it_/
I

, ,g'r__if--, _-*.-- ' lrnice.Jf z

lime +

1l 'hl '--1
| .---

,/
/
./

/ )

I
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LEGEND
CAPEX= (investments) Capital Expenses OPEX -OperationI Mainlenance (oam)Expenses NPV - Net Present Value(after tax) Discount r Factor(real) ? Uncertan - Estimate

Fig. l.The net present vaiueequation.

Maximize recovery factor,NPV and production ratesreducing capital expenditures andoperating expenses. The project's historyand the presentworthof curnulative cashflow is positive net ensures the project that satisfies corporate the coirstraint investment. on

53

(Present lVofihs,nive netcash flow)ft

flow)r.l _ = i(netuash

;f

(1+P';t I

o .E
E o

o .o
G

F o
a ct o o
q) .E G

E g o
t o i
q) a 0) 0-'

o0

FigfS!fl.*en-t worthof cumularive cash net flow profile:d equffiffieofmaximum exposure, pJ,i""i?tffii,t; andIequalsproject trre.

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